Question

The following accounting events affected Nelson Manufacturing Company during its first three years of operation. Assume that all transactions are cash transactions.
Transactions for 2013
1. Started manufacturing company by issuing common stock for $4,000.
2. Purchased $1,200 of direct raw materials.
3. Used $800 of direct raw materials to produce inventory.
4. Paid $400 of direct labor wages to employees to make inventory.
5. Applied $250 of manufacturing overhead cost to Work in Process Inventory.
6. Finished work on inventory that cost $900.
7. Sold goods that cost $600 for $1,100.
8. Paid $370 for selling and administrative expenses.
9. Actual manufacturing overhead cost amounted to $228 for the year.
Transactions for 2014
1. Acquired additional $800 of cash from common stock.
2. Purchased $1,200 of direct raw materials.
3. Used $1,300 of direct raw materials to produce inventory.
4. Paid $600 of direct labor wages to employees to make inventory.
5. Applied $320 of manufacturing overhead cost to Work in Process Inventory.
6. Finished work on inventory that cost $1,800.
7. Sold goods that cost $1,600 for $2,800.
8. Paid $500 for selling and administrative expenses.
9. Actual manufacturing overhead cost amounted to $330 for the year.
Transactions for 2015
1. Paid a cash dividend of $700.
2. Purchased $1,400 of direct raw materials.
3. Used $1,200 of direct raw materials to produce inventory.
4. Paid $440 of direct labor wages to employees to make inventory.
5. Applied $290 of manufacturing overhead cost to work in process.
6. Finished work on inventory that cost $2,000.
7. Sold goods that cost $2,200 for $3,500.
8. Paid $710 for selling and administrative expenses.
9. Annual manufacturing overhead costs were $280 for the year.

Required a. Record the preceding events in a horizontal statements model. Close overapplied or underapplied overhead to Cost of Goods Sold. The first event is shown as an example.


b. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet as of the close of business on December 31, 2013.
c. Close appropriate accounts.
d. Repeat Requirements a through c for years 2014 and2015.


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  • CreatedFebruary 07, 2014
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